The world depends on global finance that works towards a fairer financial system for people, environment and culture, with a focus on sustainability, climate change and social justice. This month of July Fintech time we focus on ethical finance/ethical banking, including environmentally and socially responsible practices.
The European Parliament’s the recent decision to back the plans of the European Commission labeling gas and nuclear power investments as “environmentally sustainable” has been heavily criticized, with some opponents calling the move a “travesty of investors who believe in green transition”.
According to Global Alliance for Banking on Values (GABV) the decision is a “blow to the credibility of its determination to tackle the climate crisis”. We chatted for Sonia FelipeGABV’s Communications and Marketing Officer, to learn more about the network and their perspective on the parliament’s decision.
Sonia, what is the Global Alliance for Banking on Values?
The Global Alliance for Banking on Values is a network of independent banks using finance to deliver sustainable economic, social and environmental development. Our goal is to expand and strengthen the practice of values-based banking and pave the way for a financial system that is more transparent and promotes social equity, responds to the climate emergency and delivers prosperity and well-being. -be genuine and lasting for all.
Integrity, human dignity and environmental protection are at the heart of the activities of our member banks. Leading by example, they lead the transformation of banking and finance in their respective communities, countries and regions and extend their reach and impact by supporting others on the journey of change.
Tell us about your members
The GABV was founded in 2009 by 10 member banks and currently has 68 members in 40 countries in Africa, Latin America, Asia-Pacific, North America and Europe. Collectively, we serve 60 million customers, have more than $200 billion in combined assets under management, and are supported by 80,000 people. In the UK, there are four member banks: Triodos Bank UK, Charity Bank, Ecobuilding
Company and recently Unity Trust Bank.
- Triodos Bank is Europe’s leading sustainable bank, with offices in the Netherlands, Belgium, UK, Spain and Germany and more than 700,000 customers. Founded in 1980, Triodos Bank’s mission is to help create a society that protects and promotes quality of life and human dignity for all. Triodos Bank focuses its activities on three general themes: environmental, cultural and social. Together these cover a wide range of sectors – from renewable energy, organic farming and social housing to retail, charities and education. Triodos Bank UK, based in Bristol, manages over £1.6 billion in total assets and a loan portfolio of over £1 billion and serves 85,000 customers.
- Ecology Building Society is dedicated to building a greener society by providing mortgages for properties and projects that respect the environment and support sustainable communities, funded through its range of simple and transparent savings accounts. Having started as a group of like-minded people committed to building a more sustainable future, it remains the same type of institution, helping to fund environmental renovations of buildings and supporting sustainable development. Founded in 1981, it manages £256.3 million in total assets, gross loans of £69.4 million and serves 12,000 members.
- Charity Bank is the savings and loans bank owned by and committed to supporting the social sector. It was founded in 2002 to support charities and social enterprises with loans and to provide people with a savings option in line with its values. Since 2002, it has used savers’ money to make over 1,100 loans totaling over £400 million for housing, education, social care, community and other social purposes. It manages £312 million in total assets.
- Unity Trust Bank provides specialist banking services to unions, charities and other organizations that operate in the not-for-profit sector and for-profit businesses in the UK. Founded in 1984; the head office is located in Birmingham. For more than 35 years, the bank has helped organizations thrive and contribute to positive economic, social and environmental change. It manages £1.6 billion in total assets. In 2021, he increased his loans to £723.5million.
Who can join the Alliance?
To be a potential member, banks must adhere to the “Principles of Values-Based Banking” and meet a comprehensive set of criteria. Although members may not meet all criteria, we expect – and monitor – progress over time. GABV members complete a dashboard with quantitative and qualitative information, which is presented to the GABV Board for approval. This dashboard is updated annually. This does not mean, however, that members go through a pass/fail evaluation, rather it is an opportunity to provide feedback if requested or deemed necessary.
The GABV Dashboard sets the standard, monitors and communicates progress for values-based banking. The GABV dashboard emphasizes the two most distinctive factors common to stocks
institutions: at the service of the real economy and placing the social and environmental impact at the heart of their economic model. This tool which can be used by any bank.
The European Commission voted earlier this month to include nuclear power and natural gas as environmentally sustainable investments in a new green taxonomy – what it means and why what significant?
The GABV regrets the decision to include gas and nuclear in the EU green taxonomy. This decision jeopardizes the credibility and success of the considerable work done by EU institutions in recent years to regulate the ESG financial sector. Although the market for sustainable financial products is growing rapidly, there is no common understanding or minimum benchmark for what “sustainability” actually means. Reliable minimum standards for sustainable investments are needed to combat greenwashing in financial markets.
We believe that the European Commission and the European Parliament are wrong for several reasons:
- From an environmental point of view, gas and nuclear energy are very problematic energy sources, as shown by scientific and empirical evidence.
- Gas and nuclear energy are well financed. The EU taxonomy, however, was designed to offer a classification system to direct investments towards sustainable projects and activities, not to raise funds for well-established industries. The inclusion of gas and nuclear energy in the EU taxonomy will affect its integrity and credibility with investors and therefore their ability to provide capital and financing to truly green industries that need funding.
- The decision is not in line with the environmental objectives defined and developed in the stakeholder process leading to the taxonomy. They include: climate protection, pollution prevention and protection of ecosystems and biodiversity. Gas and nuclear are contrary to these objectives. Several EU countries and NGOs have announced legal challenges to the decision because it contradicts the vital requirement to “do no significant harm”.
- The EU taxonomy is politicized as a tool to defend the national interests of the few, instead of creating a shared framework to address the climate emergency that affects the many. It is used to bleach gas and nuclear energy.
- The decision undermines the credibility of the EU with regard to its declared objectives of environmental protection.
Why are values-based banks and ethical financial institutions so important?
Finance plays a central role in shaping the economy, our society and the environment. Banks are not just money brokers. In deciding how to allocate money, banks are important agents of change. Every loan and investment has an impact on our communities, our environment and our economic future, for better or for worse. Many people depend on access to finance to realize their full potential and lead a decent and dignified life.
Banking and finance therefore come with great responsibility. With this in mind, there is a growing number of banking pioneers and leaders around the world with a values-driven approach to banking. They have joined forces in the GABV with a common mission to make finance work for people and the planet.
A final thought?
We believe that the green taxonomy controversy should not derail ongoing work on social impact in the
EU taxonomy. The GABV asks the European Commission to ensure the development of an ambitious and
unambiguous social taxonomy and take into account the views of the platform on sustainable finance
(PSF). In its final report, the PSF stressed that it is crucial to clearly define what constitutes a